Is the market out of the woods yet? No.
Is there a change in trend with the most recent bounce bank in the indices? No.
Are some areas of the market doing better than others? Yes.
Are we here to discuss one such sector today? You bet we are!
We’ve been pounding the table about the strength that we’ve been noticing in the Auto space for over a month now. With that trend becoming more and more clear, we have a few more names joining the leaders. The Auto sector is exhibiting strengths that cannot and should not be ignored. Read on to know more!
First up, let’s take a look at the index chart and focus on the levels here. 10,400 has acted as a crucial zone of support during the past five months of whipsaw moves in the market. The index continued to hold on to these levels even as other sectors were giving up on their floors without a fight. That was our first sign of relative strength.
The index has since bounced back and is currently trading close to 11,580. The next level to track here is the 2018 high level near 12,130. It will be quite interesting to see how the price reacts around these levels. Remember, the 2018 highs are significant because risk-on metrics across the globe started rolling over around the same time. A move above those highs would be a big signal here.
Click on the chart to zoom in.
Next up, let’s add more weight to this analysis, shall we?
Let’s bring in the relative strength chart. As can be seen in the chart below, the ratio of Nifty Auto/ Nifty 100 broke out of a three-year base. Big base breakouts in the current market scenario. That’s definitely worth our attention, right? The more times a level is tested, the more likely it is to be breached!
Let’s start with our roster sheet now.
We shared this idea as the Trade of the week, please find the analysis here.
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